Life insurance for children: things you need to know

It's a scenario no parent wants to contemplate: their child suddenly suffering a life-threatening illness. How does one cope with such a nightmare, and is there any kind of financial safety net available? An objective view on a sensitive subject can help families stay afloat in extremely emotional times.

What is child life insurance?

The unexpected death, terminal or critical illness of a child can be difficult to manage financially, as well as emotionally. While Medicare, private health insurance and the Pharmaceutical Benefits Scheme (PBS) may cover the cost of medical and hospital treatment, and help with access to ongoing medication, there may be out-of-pocket expenses that are not recoverable. Additionally, a parent may need to cease or reduce their work in order to care for a sick child, which can result in a challenging financial situation for the family.

Much like with an adult life insurance product, a child’s life insurance benefit can be paid if your child passes away or is diagnosed with a terminal or critical illness. It could provide a financial safety net to help the family get through a very difficult time.

How do life insurance policies for kids work?

Generally speaking, life insurance cover for children is available as an additional benefit to a life insurance policy for an adult. Insurance companies do not widely offer standalone child’s cover in Australia.

Does TAL offer child cover?

Yes, TAL offers a Child’s Critical Illness Benefit. TAL offers automatic cover of $10,000 per child under the Accelerated Protection product for loss of life, terminal illness and critical illness when an adult Life, TPD (Total & Permanent Disability) or Critical Illness (Trauma) policy is taken outside of superannuation. This includes cover for major illness events such as meningitis, head trauma or organ transplant.

TAL also offer the ability to take out cover up to $200,000 under a separate Child’s Critical Illness policy.

What can a child be covered for?

Child life insurance cover is generally available for children after they have had their first birthday and can usually be renewed until age 18 for financial dependents. Comprehensive cover may not be available if a child has already developed a medical condition.

Can life cover for children be combined with a savings plan for higher education?

Child endowment life insurance plans were popular some decades ago but are less common now. These policies had both an insurance and a savings component. They could be taken out to save for a child’s education or to provide them with a lump sum of money at specific ages—like 18, 21 or 25. These policies were phased out in Australia in favour of other ways of saving for an education, like standalone bonds and annuities.

What other kind of things should parents consider when thinking about taking out a life insurance policy for a dependent child?

When taking out life insurance for a child it is important to consider the level of cover on offer (i.e. the benefit amount), the waiting periods (i.e. the amount of time between taking out the cover and making a claim) and the specific conditions that are included or excluded from the policy. You can find out this level of detail by checking all the details, terms and conditions in the relevant Product Disclosure Statement (PDS).

If a child comes down with a grave illness, is it too late to take out a policy for them?

Unfortunately, yes. Child’s life insurance cover cannot usually be taken out for existing medical conditions.

Any financial product advice is general in nature only and does not take into account any person’s objectives, financial situation or needs. Before acting on it, the appropriateness of the advice for any person should be considered, having regard to those factors. Persons deciding whether to acquire or continue to hold life insurance issued by TAL should consider the relevant Product Disclosure Statement (PDS). The Target Market Determination (TMD) for the product (where applicable) is also available. Life insurance issued by TAL Life Limited ABN 70 050 109 450 AFSL 237848.